Free Enterprise - The FindLaw Small Business Law Blog

Small Business Wins Big Supreme Court Patent Case

Lexmark International is a worldwide laser printer and imaging company with over $3.7 billion in annual revenue. Impression Products, on the other hand, has 25 employees and less than $15 million in annual sales. Yet this small business David took a Goliath to the Supreme Court, and won.

In what could be a big win for small businesses nationwide, the Court held that subsequently purchasing an already-sold and patented item does not violate patent law. And just like that, a seemingly esoteric corner of intellectual property law could mean millions for consumers and small businesses.

All the Cartridges Fit to Print

We all hate how expensive new printer cartridges are, and many companies like Impression Products saw a market for purchasing, remanufacturing, and reselling printer cartridges for less than the cost of new ones. To combat this, large cartridge manufacturers like Lexmark offered customers a discount in exchange for a promise to not resell or reuse cartridges.

In Lexmark's case, they gave customers 20% off in exchange for the non-resale agreement, an agreement that came in the form of what's known as a "shrink-wrap license," where the terms of the agreement appear on the outside of the cartridge box and the customer agrees to the terms just by opening the box. But instead of suing individual customers for violating the license by reselling or reusing cartridges, Lexmark went after cartridge resellers, like Impression Products for patent infringement.

A Case of First Impression

While the majority of the little guys settled, Impression Products fought the case, arguing "patent exhaustion": that a patent holder's rights extend only to the initial sale and after that, customers are free to do what they please with the product. And the Supreme Court agreed.

"Lexmark exhausted its patent rights in these cartridges the moment it sold them," wrote Chief Justice John Roberts for the majority. "The single-use/no-resale restrictions in Lexmark's contracts with customers may have been clear and enforceable under contract law, but they do not entitle Lexmark to retain patent rights in an item that it has elected to sell."

And while this may just look like a win narrow win for Impression and laser printer users looking to save a couple bucks, the ruling may have more far-reaching ramifications, as Gizmodo colorfully points out:

All things considered, consumers and advocates for their rights won today. This case has been called the Citizens United of products, but this time the Supreme Court actually came down on the side of the people instead of the corporations. That means you can keep buying cheaper printer cartridges, cheaper smartphones, cheaper drugs--the price of pretty much anything that's protected by a shady patent isn't going to skyrocket any time soon. That's great news for printer enthusiasts and sufferers of erectile dysfunction alike.

Related Resources: